RvD: Rossi MSJ Count I arguments

Collating the arguments in the Rossi MSJ, IH Opposition, and Rossi Reply on Count 1, Breach of Contract.

Motion by Rossi

03/23/2016 0214.0_Rossi_Motion_for_Partial_Summary_Judgment

II. As a Matter of Law, Plaintiff Leonardo is Entitled to Summary Judgment As to
Count I of the Complaint.

To prove a claim for breach of contract, Plaintiffs must establish: “(1) the existence of a
contract; (2) a material breach of that contract; and (3) damages resulting from the breach.” Merle
Wood & Assocs., Inc. v. Trinity Yachts, LLC, 857 F. Supp. 2d 1294, 1301 (S.D. Fla. 2012) (quoting
Vega v. T-MobileUSA, Inc., 564 F.3d 1256, 1272 (11th Cir.2009))

A. An Agreement Existed.
(i) The Initial Agreement.

The parties entered into the License Agreement on or about October 26, 2012. See Statement
of Facts (“SOF”) ¶ 5. Section 3.2(c) of the License Agreement provided that within 5 days following
350 days of operation of the Plant (defined as the 1MW E-Cat unit) which the Guaranteed Performance
has been achieved as required by Section 5 below, Defendants will pay to Leonardo $89,000,000. See
SOF ¶ 36.

Section 5 of the License Agreement, as amended, makes payment contingent upon the following factors:

1. the 1MW E-Cat unit operating at the same level (or better) at which Validation was
achieved for a period of 350 days (even if not consecutive) within a 400 day period
(defined as “the Guaranteed Performance” or “GPT”);

2. the test was to commence immediately following the delivery of the 1MW Plant to Defendants;

3. the ERV (as previously defined in Section 4 of the License Agreement)[2] will confirm in writing the Guaranteed Performance. The ERV was, pursuant to the agreement, the final and binding arbiter as to whether Guaranteed Performance was achieved. See SOF ¶ 34.


[2] Section 4 provides, in pertinent part: “The ERV will be chosen by mutual agreement between Leonardo and [Defendants]
and Leonardo and [Defendants] shall bear the ERV’s costs fifty-fifty.”


The parties agreed that Fabio Penon would serve as the ERV. See SOF ¶ 14. On May 7, 2013,
the ERV determined that, pursuant to Section 4 of the License Agreement, Validation had been deemed successful and achieved in that the 1MW Plant had produced energy greater than the energy consumed. See SOF ¶ 17. Thereafter, Defendant IH caused $10,000,000 to be paid to Leonardo as a result of the successful and achieved Validation. See Countercl. ¶ 58; see also See SOF ¶ 20.

(ii) Amendment as to the Time of Performance of the GPT.

The 1MW E-Cat unit was delivered to Defendants in August of 2013. See SOF ¶ 38; Countercl. ¶ 59. Defendant IH and Leonardo executed a Second Amendment to the License Agreement in October of 2013, which changed Section 5 as follows: (a) the time for commencement of the Guaranteed Performance Test to be “the date agreed to in writing between the Parties, and (b) the equipment to be
tested to be the “Six Cylinder Unit.” See SOF ¶ 10.

At no time prior to November of 2015 did Defendants provide any notice, whether in writing or orally, that they believed that Leonardo had violated Section 5 of the License Agreement. See SOF ¶ 60. Defendants’ internal and external communications reflected Defendants’ agreement that the time for commencement of the GPT had been extended. See SOF ¶ 40. Further, IH’s corporate representative, Defendant Vaughn, testified that, notwithstanding that Leonardo delivered the plant late, IH was still willing to pay for performance. See SOF ¶ 43.

The parties subsequently agreed that the 400 day period (GPT) would commence in February 2015. See SOF ¶ 49 (“Tom [Darden]. . . reported that the 400-day test is about to commence.”). (iii) Amendment as to the Equipment to be Tested for the GPT.

The parties agreed that the unit to be tested would be the 1MW E-Cat unit. See SOF ¶ 42. In or around December of 2014, in furtherance of their agreement, Defendant IH shipped the 1MW E-Cat unit from North Carolina to Doral, Florida. See SOF ¶ 43. In or around February 2015, Penon submitted a protocol for the GPT to both Rossi and Darden. See SOF ¶ 44. The protocol clearly identified the equipment to be tested to be the 1MW E-Cat. Id. Defendant Darden even provided suggested modifications to Penon’s protocol, but agreed it would left up to Penon. See id. (2/18/15 email from Darden to Penon, whereupon Darden responded: “Thanks do [sic] very much for your important work. This evaluation will have the eyes of the world on it once we release any information.”). Defendants confirmed to their own purported expert witness, Mr. Rick Smith, that they agreed to Penon’s protocol. See SOF ¶ 46.

B. Leonardo Performed its Contractual Obligations/Met Conditions Precedent.

The ERV submitted quarterly reports to both Defendants and Plaintiffs. See SOF ¶ 52. At no time prior to November of 2015 did any of the Defendants ever object to Penon as the ERV or the protocol for the GPT. See SOF ¶¶ 41, 45. To the contrary, during the performance of the Guaranteed Performance Test, Defendant IH brought investors to tour the facility where Plaintiffs were performing the GPT, and to ask questions of Rossi. See SOF ¶ 53. In fact, IH closed on a $50mm fund-raise in May of 2015. See SOF ¶ 55. On or about March 29, 2016, the ERV submitted his Final Report, showing that the plant achieved a COP in excess of 6.0 for the required period of time. See SOF ¶ 57.

C. Defendants IH and IPH are in Breach of Contract.

It is undisputed that, Leonardo demanded payment of the $89mm as set forth in the License Agreement. See Countercl. ¶ 74. It is likewise undisputed that Defendants IH and IPH refused to make that payment. See id. ¶ 80.

D. Plaintiff has been damaged.

Pursuant to the unambiguous language in the License Agreement, Plaintiff Leonardo is entitled
to payment of $89,000,000.00. See SOF ¶ 36.

E. Legal analysis.

As set forth above, Plaintiffs are able to establish, via undisputed facts, all of the necessary elements to prove their claim for breach of contract. Assuming, arguendo, that no writing exists modifying the timing of the GPT and equipment to be used therefore, the subsequent course of dealing between the parties establishes a waiver. Florida law holds that a “subsequent dealing between the parties may establish a waiver of a requirement that modifications must be made in writing,” irrespective of any anti-waiver clause present in the underlying agreement. Dioguardi v. Giroski, LLC, Case No. 12-23354-CIV-MARTINEZ-MCALILEY, 2013 U.S. Dist. LEXIS 192319 (S.D. Fla. Mar. 20, 2013) (quoting In re Electric Machinery Enters., Inc., 416 B.R. 801, 886 (M.D. Fla. 2009)). That holding is consistent with basic contract principles, which state that “[u]nder no circumstances may the non-breaching party stop performance and continue to take advantage of the contract’s benefits,” Burger King Corp. v. Hinton, Inc., 203 F. Supp. 2d 1357, 1365 (S.D. Fla. 2002), and that an “implied term of a contract, recognized by Florida law, is the implied covenant of good faith and commercial reasonableness,” First Nationwide Bank v. Florida Software Servs., Inc., 770 F. Supp. 1537 (M.D. Fla. 1991). In other words, the Defendants are prohibited from continuing to deal with Plaintiffs, allowing Plaintiffs to continue performing their obligations pursuant to the License Agreement, and taking advantage of the benefits provided by Plaintiffs, while simultaneously stopping their own performance. Defendants have indisputably done just that – to the tune of receiving funding in excess of $50 million. See SOF ¶ 55.

It is undisputed that Defendants continued to deal with Plaintiffs, and allowed Plaintiffs to continue performing their contractual obligations subsequent to the agreed-upon modifications as to the time of the commencement of the Guaranteed Performance Test and the equipment to be tested. It is undisputed that at the relevant times herein, IH owned and controlled the 1MW E-Cat Plant, and allowed for its shipment. See SOF ¶ 43. From the day the Guaranteed Performance Test began in February 2015, through the day it ended in February 2016, Dr. Rossi consistently apprised Defendants, in writing, of the status thereof. See SOF ¶ 50. IH’s investors often responded to such updates with excitement. Id. Rossi himself spent over 16 hours per day for over 350 days in an extremely hot and uncomfortable working environment, performing the contractual test. See SOF ¶ 51.

The Defendants, on the other hand, are unable to cite to even a single response wherein they disputed that the Guaranteed Performance Test was, in fact, taking place. Instead, IH admitted that it never told Rossi that the time for the Guaranteed Performance test had come and gone, or that Plaintiffs had somehow breached the License Agreement. See SOF ¶ 60. The ERV, Fabio Penon, provided similar updates to Defendants regarding the Guaranteed Performance Test’s protocol. See SOF ¶ 52. Again, Defendants cannot point to a writing in which they object to, question, refuse, refute, or otherwise dispute the same.

In contrast, throughout Plaintiffs’ performance of the Guaranteed Performance Test, the Defendants solicited and received in excess of $50 million in investments premised upon such work. See SOF ¶ 55. The biggest investor even stated that “Rossi’s technology was a core element of the initial investment.” See SOF ¶ 56.

Notwithstanding their blatant use of Plaintiffs’ technology to raise $50 million plus, Defendants did not have any intention of making their requisite $89 million payment to Plaintiffs as early as October 2013. See SOF ¶ 61. Yet, again, Defendants are unable to cite to even a single e-mail, writing, and/or other document in which they advise Plaintiffs of the same. Defendants’ conduct of continued dealing with the Plaintiffs and using Plaintiffs’ work to solicit millions of dollars in investments, while at the same time knowing that they never intended to perform their own obligation, is in bad faith and commercially unreasonable pursuant to Florida law. There are accordingly no genuine issues of material fact that Defendants waived any relevant provisions of the License Agreement with respect to the Guaranteed Performance Test’s timing and equipment.

Industrial Heat Opposition

04/04/2017 0237.0_IH_Opp_to_214_Rossi_MSJ

II. Plaintiffs Are Not Entitled to Summary Judgment As to Count I of the Complaint

Plaintiffs argue that they are entitled to summary judgment on Count I of their Complaint because they successfully completed the Guaranteed Performance test but IH and IPH have refused to pay Leonardo $89 million pursuant to section 3(c) of the License Agreement. Mtn. 20-21. Plaintiffs do not dispute that they conducted their test well after the time period allowed under the License Agreement, but they argue that does not thwart their claim. Plaintiffs’ argument is premised on three points: (i) a Proposed Second Amendment to the License Agreement (the “Proposed Second Amendment”) extended the time for commencement of the Guaranteed Performance test, (ii) while the Proposed Second Amendment required testing of a Six Cylinder Unit, the parties agreed to test the 1 MW Plant instead, and (iii) even if there was no agreement extending the time period and changing the device to be tested, the subsequent conduct of the parties established a waiver of any written requirements in the License Agreement that Plaintiffs did not meet.

Plaintiffs failed to comply with the terms of the License Agreement in conducting either
the Validation Test or the alleged Guaranteed Performance test. Therefore, summary judgment
on Count I in Defendants’ favor is warranted.

A. The Terms of the License Agreement

The License Agreement is crystal clear as to when Plaintiffs were required to conduct any
Guaranteed Performance test:

Payment of the amount set forth in Section 3(c) above is contingent upon the Plant operating at the same level (or better) at which Validation was achieved for a period of 350 days (even if not consecutive) within a 400 day period commencing on the date immediately following delivery of the Plant to the Company [i.e., IH] (“Guaranteed Performance”). License Agreement (Pl. SOMF Ex. 4) § 5 (emphasis added).

Plaintiffs acknowledge in their Statement of Material Facts that the 1 MW Plant was delivered to IH in August of 2013. Pl. SOMF ¶ 38. Therefore, to comply with the License Agreement, Plaintiffs would have had to begin the Guaranteed Performance test by no later than October 2013 so that they could operate the 1 MW Plant for “a period of 350 days (even if not consecutive) within a 400 day period commencing on the date immediately following delivery of the 1 MW Plant to the Company.” Pl. SOMF Ex. 4 (License Agreement) § 5. Plaintiffs admit they did not commence a Guaranteed Performance test either in 2013 or even in 2014. Instead, they did not allegedly commence such a test until 2015. Pl. SOMF ¶ 49.

B. The Proposed Second Amendment

Plaintiffs contend that Leonardo is nevertheless still entitled to $89 million under the License Agreement because the Proposed Second Amendment provided them with additional time to commence the test. This contention fails for at least two independent reasons.

First, the Proposed Second Amendment was not effective because it was not signed and executed by all parties. See Def. SOMF ¶¶ 115-117. The general rule is that “a contract not signed by all of the parties, but otherwise valid, may be upheld against a signing party, unless the nature or the wording of the contract indicates that his signature was conditioned upon all other parties signing the contract.” Skinner v. Haugseth, 426 So.2d 1127, 1131 (Fla. Dist. Ct. App. 1983). The Proposed Second Amendment is little more than a page long, but Section 3 makes the parties’ intentions expressly clear: “This Amendment may be executed in counterparts . . . provided that one or more counterparts collectively shall contain the signatures of all Parties to this Amendment” (emphasis added). Proposed 2d Amendment (Pl. SOMF Ex. 7) § 3.

The Proposed Second Amendment was not effective because it was not signed by either
AEG or IPH (or, for that matter, by Rossi in his individual capacity). Proposed 2d Amendment
(Pl. SOMF Ex. 7); Def. SOMF ¶ 117. Both were essential to any License Agreement modification. Most of IH’s rights under the Agreement had previously been assigned to IPH (with Rossi and Leonardo’s consent) under an Assignment and Assumption of the License Agreement (“Assignment Agreement”). See 1st Amendment (Pl. SOMF Ex. 5) § 16.7; Assignment Agreement (Pl. SOMF Ex. 6); Pl. SOMF ¶ 9. Altering what would constitute “Guaranteed Performance” under the Agreement would directly impact IPH’s rights. In addition, AEG could have received an additional payment if Rossi and Leonardo achieved “Guaranteed Performance.” Def. SOMF ¶ 115. AEG thus had a direct interest in any change to the Agreement that would alter what had to be done to accomplish Guaranteed Performance. See id.

Not surprisingly, the parties recognized that the Proposed Second Amendment was not effective absent the signatures of all the relevant parties. Id. ¶ 117. Indeed, even Rossi admitted that the Proposed Second Amendment was not effective because AEG did not execute it. See id. ¶ 117 & Ex. 21 at IH-00091696 (“Ampenergo did not sign and the amendment has been cancelled.”).

Second, even if the Proposed Second Amendment was effective, it is crystal clear that the
Guaranteed Performance test thereunder could not be conducted using the 1 MW Plant; rather, a
different “Six Cylinder Unit” needed to be used for any such test:

Payment of the amount set forth in Section 3(c) above is contingent upon a six
cylinder Hot Cat unit reasonably acceptable to the Company (the “Six Cylinder
Unit”) operating at the same level (or better) at which Validation was achieved
for a period of 350 days (even if not consecutive) within a 400 day period
commencing on the date agreed to in writing between the Parties (“Guaranteed
Performance”).

Proposed 2d Amendment (Pl. SOMF Ex. 7) § 5 (emphasis added).

There is no question that what Plaintiffs used for their alleged Guaranteed Performance
test was the 1 MW Plant, not the Six Cylinder Unit. Def. SOMF ¶ 118. These devices are
clearly distinct: The latter is a round, tub unit containing six hot cat reactor units and is used to
heat oil rather than water. Id. ¶ 118. The Six Cylinder Unit remains in North Carolina and was
never sent to Florida, for testing or otherwise. Id. ¶ 118.

C. Alleged Oral Modification

Plaintiffs try to explain away the obvious fact that they did not comply with the terms of the License Agreement or with the terms of the Proposed Second Amendment (the agreement they claims governs) by arguing that there was a further modification by the parties. Specifically, Plaintiffs claim that because IH shipped the 1MW Plant to Florida, and accepted Fabio Penon’s (“Penon”) test protocol, the “parties agreed that the unit to be tested would be the 1MW E-Cat Unit.” Mtn. at 20. Assuming for purposes of this argument that the Proposed Second Amendment is the operative agreement – as Plaintiffs claim – Plaintiffs have completely failed to demonstrate any alleged modification.

The License Agreement clearly states:

This Agreement may be amended, superseded, canceled, renewed or extended,
and the terms hereof may be waived, only by a written instrument signed by the
Parties or, in the case of a waiver, by the Party waiving compliance. No delay
on the part of any Party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof. License Agreement (Pl. SOMF Ex. 4) § 16.9 (emphasis added).

This paragraph was not altered or amended by the First Amendment or the Proposed Second Amendment, and therefore remained “in full force and effect.” 1st Amendment (Pl. SOMF Ex. 5) § 2; Proposed 2d Amendment (Pl. SOMF Ex. 7) § 2. Florida law is clear that “when a contract plainly provides that any modification must be in writing, all claims—however labeled—founded upon an alleged oral modification should generally be disposed of as a matter of law.” Okeechobee Resorts, L.L.C. v. E Z Cash Pawn, Inc., 145 So. 3d 989, 993 (Fla. Dist. Ct. App. 2014). As the Okeechobee Resorts court explained:

Contracts are voluntary undertakings, and contracting parties are free to bargain for—and specify—the terms and conditions of their agreement. That freedom is indeed a constitutionally protected right. Contracting parties are at liberty to address any issue they see fit, including the question of whether their agreement may be modified at all, and, if so, how. When contracting parties elect to adopt a term or condition, including one addressing the question of modification, it is not the province of a court to second guess the wisdom of their bargain, or to relieve either party from the burden of that bargain by rewriting the document. Rather, it is a court’s duty to enforce the contract as plainly written. Id. (internal citations omitted).

A party thus bears a heavy burden in attempting to enforce an alleged oral modification of a contract requiring that modification must be in writing:

[A] party pursuing such a claim [must] allege and prove more—indeed much more—than just a ‘mutual agreement,’ or just ‘detrimental reliance,’ or just ‘subsequent conduct,’ or just generalized ‘inequitable conduct.’ Rather, a plaintiff must again allege—and eventually prove—that the oral amendment was ‘accepted and acted upon by the parties in such a manner as would work a fraud on either party to refuse to enforce it.’ Cahill, 90 So.2d at 918 [Professional Insurance Corp. v. Cahill, 90 So.2d 916, 918 (Fla. 1956)]. This requires that a plaintiff plead (and again eventually prove): (a) that the parties agreed upon and accepted the oral modification (i.e., mutual assent); and (b) that both parties (or at least the party seeking to enforce the amendment) performed consistent with the terms of the alleged oral modification (not merely consistent with their obligations under the original contract); and (c) that due to plaintiff’s performance under the contract as amended the defendant received and accepted a benefit that it otherwise was not entitled to under the original contract (i.e., independent consideration). Absent such a showing, the parties will be held to the bargain as  negotiated and memorialized in their written agreement. Okeechobee Resorts, L.L.C., 145 So. 3d at 995.

The Eleventh Circuit has held that Okeechobee Resorts is the correct statement of Florida law. See Energy Smart Indus., LLC v. Morning Views Hotels–Beverly Hills, LLC, 660 Fed. App’x 859, 864 (11th Cir. 2016).

Plaintiffs have “failed to plead any facts—or present any summary judgment evidence—that could trigger the Cahill exception.” Okeechobee Resorts, L.L.C., 145 So. 3d at 995. Plaintiffs’ argument that the parties “agreed” to test the 1 MW Plant is insufficient as a matter of law. Further, the License Agreement already gave IH and IPH the license to and transfer of the E-Cat IP. Plaintiffs do not claim to have offered anything more to orally modify the Agreement. Thus, even if this Court finds that the Proposed Second Amendment was effectively entered – which it was not – Plaintiffs failed to comply with its terms by using the 1 MW Plant rather than the Six Cylinder Unit for the alleged Guaranteed Performance test. Plaintiffs are therefore not entitled to the payment of $89 million.

D. Waiver Based on Subsequent Conduct

Plaintiffs’ final argument to allow them to depart from the terms of the License Agreement is that even if “no writing exists modifying the timing of the [Guaranteed Performance test] and equipment to be used therefore, the subsequent course of dealing establishes a waiver.” Mtn. at 21. This argument is meritless.

First, the License Agreement contains a clear anti-waiver provision which states that there can be no waiver absent “a written instrument signed by… the Party waiving compliance” and that “[n]o delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof.” License Agreement (Pl. SOMF Ex. 4) § 16.9 (emphasis added). Florida courts have consistently upheld anti-waiver provisions such as the one contained in the License Agreement. See, e.g., Nat’l Home Communities, L.L.C. v. Friends of Sunshine Key, Inc., 874 So.2d 631, 634 (Fla. Dist. Ct. App. 2004); Rybovich Boat Works, Inc. v. Atkins, 587 So.2d 519, 522 (Fla. Dist. Ct. App. 1991); Eskridge v. Macklevy, Inc., 468 So.2d 337, 339 (Fla. Dist. Ct. App. 1985). Indeed, the courts of the Southern District have found that waiver is “defeated as a matter of law” by an anti-waiver provision contained in a contract. See MaxMara Retail, Ltd. v. Bal Harbour Shops, LLP, No. 1:12-CV-21423-UU, 2013 WL 12092079, at *3 (S.D. Fla. Feb. 22, 2013); Guarantee Ins. Co. v. Brand Mgmt. Serv., Inc., No. 12-61670-CIV, 2013 WL 6768641, at *8 (S.D. Fla. Dec. 20, 2013). Thus, the anti-waiver provision of the License Agreement bars Plaintiffs from arguing that IH or IPH waived the Agreement’s terms regarding the time for, and equipment to be used in, any Guaranteed Performance test.

Second, citing Dioguardi v. Giroski, LLC, No. 12-23354-CIV, 2013 WL 12092475, at *2
(S.D. Fla. Mar. 20, 2013), Plaintiffs incorrectly argue that the parties’ subsequent course of
dealing – whereby IH and IPH did not tell Plaintiffs that what they were doing in Doral could not
be the Guaranteed Performance test – waived the License Agreement’s anti-waiver protection.
Dioguardi addressed whether a subsequent course of dealings contrary to a contract’s condition
that modifications be in writing might waive that condition. Here, of course, the evidence
demonstrates that the parties respected the License Agreement’s written modifications condition,
as so clearly reflected by the fact that they twice prepared written modifications to the
Agreement (the First Amendment and the Proposed Second Amendment). Moreover, the
Dioguardi court held that any argument of waiver was “defeated as a matter of law by the antiwaiver
provisions of the contract itself” and that there was “no evidence to show a written
modification of the contract or an oral modification with additional consideration provided.” Id.
at *3. Dioguardi is thus in accord with Florida cases making clear that “subsequent course of
dealing” is simply not enough to modify an agreement that requires modifications to be in
writing. See Okeechobee Resorts, L.L.C., 145 So.3d at 995 (“[A] party pursuing such a claim
[must] allege and prove more—indeed much more—than just a ‘mutual agreement,’ or just
‘detrimental reliance,’ or just ‘subsequent conduct,’ or just generalized ‘inequitable conduct’”
(citing Cahill, 90 So.2d at 918)); Energy Smart Indus., LLC, 660 Fed. App’x at 864.

Third, Plaintiffs’ assertion that IH or IPH should be faulted for not telling Plaintiffs that
they were too late in attempting to conduct a Guaranteed Performance test is both factually
incorrect and irrelevant. Thomas Darden told Rossi back in late 2013 or in 2014 that the time for
commencing the Guaranteed Performance test had passed. Def. SOMF Ex. 3 at 123:23-125:13.
Moreover, the License Agreement is clear as to the timing requirement, and the Proposed Second
Amendment is clear as to testing a Six Cylinder Unit. Neither IH nor IPH had an obligation to
read the clear language of the License Agreement or the Proposed Second Amendment to
Plaintiffs.

E. Plaintiffs’ Prior Breaches of License Agreement

Count I of the Complaint fails for the reasons stated above. It also fails because, prior to Plaintiffs demanding $89 million under the License Agreement in March 2016, they had repeatedly breached the Agreement, as demonstrated in Defendants’ summary judgment motion [D.E. 203] and statement of undisputed material facts [D.E. 207]. A party’s “[p]rior material breach of a contract excuses further performance by the other party.” Managed Care Sols., Inc. v. Cmty. Health Sys., Inc., No. 10-60170-CIV, 2012 WL 12861133, at *6 (S.D. Fla. May 14, 2012), report and recommendation adopted, No. 10-60170-CIV, 2012 WL 12861134 (S.D. Fla. June 4, 2012); Cheezem Dev. Corp. v. Intracoastal Sales & Serv., Inc., 336 So.2d 1210, 1212 (Fla. Dist. Ct. App. 1976) (“As the party who initially committed a substantial breach of the contract, Intracoastal was not entitled to avail itself of a claimed subsequent breach by Cheezem” (citing Chatlos v. Morse Auto Rentals, Inc., 183 So.2d 854, 855 (Fla. Dist. Ct. App. 1966))).

Based on the foregoing, summary judgment on Count I of the Complaint should be entered in favor of IH and IPH, not Plaintiffs. The undisputed material facts show that Plaintiffs did not comply with the written terms of the License Agreement or the Proposed Second Amendment. Plaintiffs cannot cherry-pick for enforcement only the contractual provisions they deem favorable and discard the rest. Plaintiffs’ arguments for oral modification and waiver fail as a matter of law, and therefore, Plaintiffs were not entitled to a payment of the $89 million.

Rossi Reply

04/11/2017 0254.0_Rossi_reply_re_R_MSJ

I. Plaintiffs are entitled to summary judgment as to Count I of the Complaint.
a. Plaintiffs timely completed the GPT as required by the terms of the License Agreement.

Defendants, through explicit agreement, active encouragement and failure to make any statements to the contrary, induced Plaintiffs to spend over 16 hours a day for over 350 days in an extremely hot and uncomfortable working environment to perform the GPT. Plaintiffs had no contractual obligation to otherwise assist Defendants past May of 2014. See Pls.’Ex. ¶ 16.4. Defendants, despite claiming that the test being performed by Plaintiffs was not the GPT, successfully raised $50 million in investment funds in the midst of Plaintiffs’ performance. Only after receiving the funds did Defendants first claim that the GPT never occurred. See, e.g., SOF ¶ 51.

i. The undisputed facts show that Defendants, not Plaintiffs, caused the GPT to be delayed.

When Defendants shipped the 1MW Plant to Florida in December 2014, Defendants intended to carry on with the GPT under the License Agreement. See SOF ¶ 43. It is undisputed that Defendant IH owned, controlled, and could have started testing the 1MW Plant at that or any time. See id. Yet Defendants prevented Plaintiffs from commencing the Guaranteed Performance Test in 2013 and 2014 by representing to Plaintiffs on numerous occasions that the parties needed authorization from a North Carolina Health Department but were unable to obtain such authorization. See SOFO ¶ 24. It was not until June of 2014 that Defendants received clearance from their nuclear radiation compliance consultant. See id. When, in June 2014, Plaintiffs brought to Defendants’ attention that Defendants had not – since 2013 – indicated where to install and operate the 1MW Plant, Defendant Darden responded that “ideally we would not make a decision about this new location for a while longer” and that the “decision [could] wait a while.” See id. Significantly, Defendants fail to identify a single written request made to Plaintiffs demanding that the GPT begin, or that Plaintiffs’ failure to timely assist in the commencement of the test amounted to a breach of the License Agreement or the expiration of the time for performance. As the delay in the test was caused by Defendants, they cannot now claim that Plaintiffs failed to timely perform as a result. See, e.g., Amoco Oil Co. v. Gomez, 125 F. Supp. 2d 492, 500-01 (S.D. Fla. 2000) (“Under Florida law, parties who prevent performance of a contract by their own acts cannot take advantage of their own wrong.”); Gulf Am. Land Corp. v. Wain, 166 So. 2d 763, 764 (Fla. 3d DCA 1964) (“When one of the contracting parties prevents or hinders the performance or the acts of the other contracting party required to be performed, or prevents the discharge of a contractual duty, then such actions are generally considered to be a breach of the contract, although not specified and delineated in the written instrument.”).

ii. Plaintiffs began the GPT as soon as Defendants allowed, and timely completed the GPT per the parties’ agreement.

As noted supra, Plaintiffs had been trying to commence the GPT as early as 2013. See SOFO ¶ 23. In September 2014, Defendants admitted they would be shipping the 1MW Plant to Florida to begin the GPT, “a requirement of our contract with him.” See SOFO ¶ 25. In December 2015, Defendants shipped the 1MW Plant to Florida to begin testing, and it is undisputed that Defendants claimed they were willing to pay for performance at that time. See SOF ¶ 43. Once the 1MW Plant arrived in Florida, the parties agreed to the testing protocol. See SOF ¶ 44-46. The test ran from February 2015 to February 2016. See SOF ¶ 49. Plaintiffs apprised Defendants of the testing progress, and Defendants used those reports to induce investment. See SOF ¶ 50. Defendants brought investors to the Florida facility, despite their suspicions that there was dubious activity taking place, to induce further investment. See SOF ¶¶ 53-54. Defendants were successful in receiving a $50 million in investment in May of 2015. See SOF ¶¶ 55-56. The ERV certified the GPT results in March 2016, delivered those results to Defendants, and Plaintiffs demanded payment under the License Agreement. See SOF ¶¶ 57-58. There is no written evidence that, prior to Defendants’ receipt of $50 million in investment funds, Defendants ever told Plaintiffs that they believed Plaintiffs had violated the License Agreement or that the 350-day test taking place in Florida was not the GPT. See SOF ¶ 60.[2]


[2] 2 Defendants proffer the testimony of Defendants Thomas Darden to dispute this fact. Plaintiffs will seek to introduce
evidence showing this to be perjured testimony.


These undisputed facts show that Plaintiffs meet the standard for an oral modification set forth in the case cited by Defendants – Okeechobee Resorts, L.L.C. v. E Z Cash Pawn, Inc., 145 So. 3d 989, 993 (Fla. 4th DCA 2014). Facts show mutual asset: Defendants admitted to Plaintiffs and non-parties that the GPT would still occur after the time specified in the License Agreement. See SOF ¶ 43; SOFO ¶ 25; IH Depo Tr. at 202:24-203:21, appended hereto as Ex. D. Both parties (or at least Plaintiffs) performed consistent with the oral modification, as Plaintiffs completed the GPT. See SOF ¶¶ 44-46, 49, 51, 57-58. Defendants received and accepted a benefit that it was otherwise not entitled to under the original contract: Dr. Rossi continued to assist Defendants well past the time required by § 13.1 of the License Agreement, including speaking with investors to assist Defendants with their $50 million funding. See SOF ¶¶ 50-56. The Court’s failure to enforce the terms of the agreement as modified above would clearly work a fraud on Plaintiffs. See Sur. Bank v. Dunbar Armored, Inc., No. 14-81368-CIV-HURLEY, 2015 U.S. Dist. LEXIS 145461, at *18 (S.D. Fla. Oct. 27, 2015) (citing Okeechobee
Resorts, 145 So. 3d at 993).

Nor should the Court give credence to Defendants’ dubious argument that Plaintiffs had already breached an agreement that Defendants intentionally continued to abide by until it was time to pay the $89 million. For the reasons stated in Plaintiffs’ Partial Motion for Summary Judgment [DE 214] and Plaintiffs’ Response in Opposition to Defendants’ Motion for Summary Judgment [DE 238], Plaintiffs committed no prior breaches. Assuming arguendo, that Plaintiffs did commit a material prior breach (they did not), Defendants (a) failure to notify Plaintiffs and (b) continued acceptance of Plaintiffs’ performance constitutes a waiver of such. See Merrill Stevens Dry Dock Co. v. M/V Yeocomico II, 329 F.3d 809, 816 (11th Cir. 2003) (quoting Dunkin’ Donuts of America, Inc. v. Minerva, Inc., 956 F.2d 1566, 1571 (11th Cir. 1992) (“A material breach [of a contract] does not automatically and ipso facto end a contract. It merely gives the injured party the right to end the agreement…If he elects instead to continue the contract, the obligations of both parties remain in force and the injured party may retain only a claim for damages for partial breach.”’)).